Labor Laws, Costs, and Hiring Practices in India

Published: June 2018

In this issue of India Briefing magazine, we discuss the structure of India’s labor laws, with special reference to the country’s manufacturing and IT sectors. We also briefly examine the composition of India’s labor market and compute average hiring costs in IT and manufacturing. Finally, we put a spotlight on India’s female labor force participation rate, which is among the lowest in Asia, and explain how firms benefit by pursuing diversity hiring strategies.

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  • No. of Pages: 13 pages

In this issue:

  • Federal, State, and Industry Labor Laws
  • Labor Market: Structure and Costs
  • Why Businesses Must Diversify Hiring

India has the world’s second largest working age population at over 500 million, representing 18 percent of the total population. The country’s millennial populace – defined as the population aged between 18 and 35 years – is larger than the US and China’s today, respectively.

New entrants and investors should, however, mind that various regressive factors influence the distribution of labor in the Indian economy, including gender and other identity-based discrimination. Moreover, only a small segment of the labor market is highly skilled. Here, foreign firms can become industry leaders by setting best standards, such as fair recruitment practices, while being compliant with the law and improving efficiencies.

In addition, firms operating in India confront its complex structure of labor laws, which can make compliance difficult. While it is advisable to seek professional support, firms should pay attention to the existence of multiple federal labor laws as well as federally and locally enacted laws that are specific to the state and industry of location and the size of the firm.

In this magazine, we discuss the structure of India’s labor laws, the composition of its labor market, and average hiring costs, with special reference to the country’s manufacturing and IT sectors. Finally, we put a spotlight on India’s female labor force participation rate, which is among the lowest in Asia, and explain how firms will benefit through diversity hiring strategies.


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